Guest Post: Why Austerity Is Necessary

Austerity is under attack again, with Cyprus about to enter a program. Critics charge that austerity is self-defeating because it depresses growth, pushing up the debt/GDP ratio. However, austerity is a necessary (although far from sufficient) condition for countries with low national savings Indeed, there is some evidence that austerity is beginning to have positive effects. Higher savings have improved market perceptions of debt sustainability, making countries more resilient to shocks (Cyprus, Italian politics).

What is austerity for?

Austerity is sold as a way to reduce public deficits, but what it is really supposed to do is raise net national savings (savings minus depreciation) in the entire economy (not just the public sector, the private sector too). Certainly one lesson of the rolling European crisis is that excess debt can create funding crises regardless of which sector – the government, banks, households, or corporations – did the borrowing. What is important is, are savings in the entire economy sufficient to finance debt in the entire economy? If no, debt sustainability will be questioned. But if a country increases its internally generated savings, it can service its current debts, and it can invest to create a stream of income to service debts in the future.

In this sense, the commonly used debt/GDP ratio – the stock of debt divided by the current year's income – is misleading. More relevant is the amount of GDP that will be created over the lifetime of the debt, and this is surely related to the amount of savings generated by austerity. Market perceptions of debt sustainability can improve even though the debt/GDP ratio rises. This will happen when austerity depresses current growth but raises net national savings. After the ERM crisis in 1992-1993, debt/GDP ratios in the hardest-hit countries rose for many years, but bond yields declined rather quickly, as net national savings rose.

To be sure, European governments have been guilty of false advertising. They claimed that fiscal austerity would not hurt growth. But in order to raise savings, it is necessary to consume or invest less (unless a country is lucky enough to enjoy an export or productivity boom). As a result, growth will suffer as a country raises savings. But once savings begin to recover, elements of a "virtuous circle" begin to fall into place. Debt is serviceable and investment can return, which further enhances perceptions of sustainability. Appropriate banking and monetary policies are also necessary, but they do not obviate the need for higher savings.

Which countries are saving themselves?

Let's look at the performance of the three program countries – Greece, Ireland, and Portugal – and Spain and Italy. Greece and Portugal had negative net national savings in the five years preceding the outbreak of the European sovereign crisis in 2010. This means that they were not even saving enough to maintain their existing capital stocks. Ireland had positive net national savings, although the level declined sharply. Spain looked more like Ireland – positive but declining net national savings – whereas Italy had lower levels.

As of last year, Greece had improved to about -5% of GDP (from -14% in 2011), Portugal to -4% (from a trough of -8% in 2009), and Ireland had managed to maintain small positive net savings. Greece and Portugal in particular have much further to go, but it is noteworthy that both countries managed to raise their net savings last year: gross savings rose, investment declined, and depreciation fell.

Ireland was almost lucky to have had its problem centered in real estate overinvestment. Once the real estate bubble ended and investment crashed, net savings rose more or less automatically. The crash of investment and real estate prices necessitated banking support, but once that was in place, higher net savings allowed the bond market to stabilize. Ireland has even begun to invest again (capital formation rose 2.6% in the fourth quarter of 2012, from a trough of -31% in early 2009).

This is an early sign that the process is entering into a virtuous circle.

Greece is a different story. There, excess consumption (both private and public) had left gross savings chronically low, and there was not a lot of investment to slash. The only way to raise net savings is to cut consumption, which is much more difficult than cutting investment.

Spain resembles Ireland, in that it sported an Asia-like investment rate of 30% of GDP before the crisis, mostly in construction. Since Spain hit the wall, investment has plunged, but almost entirely in construction (-10% of GDP), which has helped repair national savings with only a minimal impact on future growth potential (machinery and equipment investment is down by just 1.5% of GDP). Italian dynamics are less favorable, as savings were lower to begin with, and investment rates are low enough that they cannot be cut much further. This implies that politically difficult cuts in consumption will have to be the primary means to raise savings.

The scale and timing of the required increase in savings is a different question from whether savings need to increase. In some cases an official sector program, or even restructuring, might be necessary. But this does not reduce the need to raise net national savings. It just suggests a different path for higher savings, or in other words, a different dosage of the same medicine, rather than a different medicine altogether.

Limited contagion from Cyprus?

Contagion to other sovereign markets has been muted since the Cyprus crisis flared up, despite poor crisis management and losses on certain classes of claimants (bank depositors and creditors) that constituted about as severe a shock as could be imagined. Perhaps Cyprus is just too small to matter. But perhaps the increase in net national savings in periphery countries has left them in a stronger position to withstand shocks. With a bigger pool of domestic resources available for debt service, contagion is less likely. Much more remains to be done (after all, Portugal and Greece still have negative net national savings), so the improvements might be enough to withstand a really large shock. But they have made the system less fragile.

In a similar vein, the EUR has been largely stable since the Cyprus shock: the EUR is down, but only modestly and in line with cyclical factors, with no contribution from fragmentation and ‘redenomination’ fears. Since last year there have been greater self-efforts to rebuild savings, and a wider mutualized backstop at the European level, effectively reducing (although not eliminating) euro redenomination risks. To some observers, the high reliance on self-help to save a currency union is contradictory and maybe even mutually exclusive, but such is the hybrid that is the EUR.

Jesus H. Christ, what have we not learned? No bailouts, clawback of banker salaries and bonuses, hang the politicians and bankers, end the neofuedalism! Starve the beast! Fuck the investment banks and their lackey politicians!!!!

If you guys are right about austerity, Japan will be a powerhouse in a couple of years. We can see the results play out before our eyes. It is Krugman vs Bass. I will put my money on Bass. Austerity is just another way of saying we are broke. This heated rhetoric does nothing to help with the debt problem. Japan, Argentina, Greece, Italy, Portugal, Spain, and Ireland. No defense spending or Bush tax cuts in those countries. It is all entitlement spending and it is dooming those countries just like it will doom the US. Reality will win in the end.

Exactly. I don't understand how so many ZH'ers are down on 'austerity', per se. The original article is not proposing continuing TBTF policies or bailing out our oligarchs, or droning more shepherds, merely pointing out that government spending - which arises from deficit financing and QE - needs to be cut back.

Yes, it would have been good if he'd pointed out that, in our debt-based monetary system, cuts in government spending and saving actually lead to monetary deflation, and thus 'austerity' on its own isn't going to fix anything; but cutting government spending is one of the key ingredients of getting our economies fixed.

Presumably, if he'd addressed fractional reserve banking in our fiat currency milieu, military overspending, majoritarian tyranny and crony capitalism, all within the context of a 500-word article, ZHer's would be applauding him?

what is hurting japan since 1989 is exactly what is ailing the west since 2008: the refusal by the governing elite to reorganize the banking sector, liquidate the stockholders, the bondholders and the toxic debt, while protecting insured depositors, and, in an orderly fdic style fashion, recapitalize the financially functioning parts of these banks, replacing the, apparently, incompetent managements that led their companies into bankruptcy.

keeping the "zombie" banks prevents an organic recovery, as japan since 1989 so amply demonstrates.

how much of the recent additions to world wide government debt is a result of weak economic growth and how much the secular trend toward more spending and less taxing is a matter of considerable debate. what isn't or shouldn't be is that too big to fail/jail is wrong on every level but the odious, and short sighted, selfishness of the corrupt rulers.

The system was designed to crash so that national sovereignty and governments minimally accountable to their own people would be destroyed. 'Austerity' is about breaking people so they will be compliant.

"The system was designed to crash..." nope. it goes always back to what fractional reserve fiat banking is and an endless conspiracy theory behind it

nope. fiat systems are designed for... war

get it in your heads, fiat central banking (not it's joined-at-the-hip older brother Fractional Reserve Banking) was born as instrument of sovereign power made for "great efforts" - usually war

note: a sovereign with a national bank is not automatically using it for war or other "great works" (for example the great Fannie and Freddy give-a-house-to-everybody programs which the US has and the UK might copy, soon) but it has the potential of going into a first-war-then-we'll-see-who-pays situation that gives a strategic advantage

this design thing has little to do with our real situation: the deep capture of the USD by a couple of megabanks for their own purposes: seven-figures bonuses

go and look at the real history of CBs, of which the FED (born 1913) is a late newcomer and an odd bird, to boot

May have been designed to finance war(s) but in the absence of REAL war where survival of the state (any state) is the object it (and its designers) have turned its use to the financing of social programs.

What better way to protect itself from attack by all constituencies?

It says, to the masses huddled around the ATM at the titty bar, if you touch me your family will starve...lol.

Probably shouldn't have interjected here because I have to go to work...but I couldn't resist commenting on the two-headed snake that is...central banks & government ;-)

100% correct - though note the ugly truth behind the US "make-homeownership-affordable-to-everybody" programs which heavely subdidized for decades what we call the "US Middle Class" - robbing Paul's son to give to Paul, in practice

Instead of the savings from austerity being invested in productive enterprise it is being used to keep alive and service bad debts. Until those bad debts are written off or restructured "austerity" is just servitude to banks.

Austerity: paying a cartel of "jewish" bankers for debt that doesn't exist, based on money that is printed by pressing a keyboard on a computer. Otherwise known as "Phase 2 of the destruction of the economies of the world" .. in preparation for phase 3... overt as opposed to the present COVERT control of every "citizen" by said WANKERS.

This may or may not be related to the birth of the internet, and subsequent loss of media control by these same wankers.

You don't support me and I down arrowed you. The true leeches are the money printing scum who drove our economy into the ground so they can keep a new Bentley in the garage via crony capitalism. Now go fuck yourself while listening to Rush or Hannity or whatever other pro-banker propaganda you enjoy hearing while fucking yourself.

Well Rand, I read the original article above and it stinks of Banker and it stinks of the Neo-Liberal economics of the past 30 years. Austerity in their minds is ONLY for the little people, while they feast off of ZIRP trillions that debase the working man's wages.

Some people are fooled into accepting that the global economci crisis is because Grandma gets too much of a Social Security pension and too much Medicare, and all those 50 years they paid into the system? Well, that went to invade Iraq and conquer Afghanistan. To build drones to bomb Pakistan. To bomb Serbia to bits. And to run a crooked war on drugs. But some people just don't get it. They know the SS fund was stolen for war since Vietnam, but still they hate Grandma for being a so called leech.

We ssaw how fast the banks and the markets were bailed out. We saw how military spending increased during the recession. But no matter how many billions the rich got from government, they lead the charge to strip old people of a puny little pension like what SS really is.

Austerity is needed. I agree. Lets start with the bankers, the hedge funders, the commodities speculators, the weapns makers, and the political class which feeds them tax payer money or destroys the dollar through QE to feed the banks.

You just described a liberal democracy, why are you blaiming Hannity or Rush? Crony Capitalism is a liberal construct and always happens under liberal forms of government. Crony Capitalism cannot thrive under a limited government. You can blame Rush and Haniity for alot of things, this one is all on the liberal Democrats. Look at Detroit and California. In order to solve a problem, you have to correctly identify the root cause.

Anyone still playing the left/right democrat/republican liberal/conservative game is still clinging to their blinders.

They are phony choices presented to keep people arguing with each other, preventing them from seeing the big picture. The United States is ruled by criminals under a one-party system masquerading as two parties.

If you present cattle with a choice of entering the abattoir through the left door or the right door, the end result is the same. Those who cling to their blinders are choosing to remain cattle.

I'm calling bullshit! Austerity is simply a fancy term for redistributing wealth from the middle and low classes upwards. US taxpayers bailed out Wall Street to the tune of $23 trillion dollars since 2008 and now tools like Hulk and the author tell us we need to give more.

Ireland is mentioned as a country who forced austerity on its populace and it is now leading to an Irish Spring. Bullshit!!! The Irish elite have destined generations of Irish to debtor status. How did this piece of shit piece ever get through Zero Hedge editors?

Work gives money value - money is work traded for work - current real time value - debt is a promise of future work - you can't get blood out of a turnip - an aging population produces less work, and the younger ones are waking up - the con is winding down

Saving in the context of this article is more like stealing -

Trading, sharing, giving, etc are all basically the same thing. Free will means "I choose" how to "spend" my actions and what "payment" I will accept.

If you possessed a brain cell that was not occupied by Red Team propaganda, and if you paid attention (I see you joined a few weeks ago) before you spouted off, you would know that the posters here are overwhelmingly anti-Obama, anti-socialist, and anti-crony capitalism. I'll bet not a single person who down voted your pro-socialism-for-bankers propaganda supports O.

Don't you just love it Rand when they come to us straight from a diet of Rush and FOX and start to spew that party line crap. Then they quickly get smacked down and don't have a clue what hit them! ZH is NOT the echo chamber of the Tea Party. You post that shit on here, and you will get called out.

Team Red? God what Bullshit. Nobody from team Blue would even dare turn up on ZH, yet this guy calls us Socialists because we don't support bank bailouts and warmongers murder across the globe. Best he tune in FOX and feed his head what it craves. ZH will blow his mind, he doesn't know who he is dealing with around here.

It is funny how you reject the policies of the Blue team and yet embrace their rhetoric. It is a simple question. Does government entitlement spending need to be cut(austerity)? If you agree with Krguman and the Blue team, you are against austerity or the cutting of government. You support the recent action by Japan. I apologize for being confused, but most of the post here are against cutting entitlement spending which leads me to the logical conclusion that they support the socialist blue team.

Austerity without writing the bad debt is not doable. Merkel does not want to print as much as the US, fine. But then she needs to admit reality and german banks need to take losses on bad debt and the periphery needs to default on their debts. Then ok, Austerity will work.

Last time that was needed, the kleptocratic imperial teutonic bankers set up concentration camps instead of facing loses. By the way, those there are not concentration {backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace}{backspace} FEMA camps, they are just...um...depots for...um...stuff.

Wow. Austerity's coming. Guess that's it. And the purpose of this austerity? Is it to save the current system? Don't think about that. Just tighten your belt. We're all in this together, right kids? A return on your savings? Just knowing everything will be OK is return enough.

what the fuck does 'austerity' mean or imply here...? does it mean that people cant borrow unlimited funds, buy everything they could never buy with credit...? oh i get...live within their means. we cant do that. we can never go back to that.

not without going thru a couple of generations of extreme pain............

"Austerity is sold as a way to reduce public deficits, but what it is really supposed to do is raise net national savings (savings minus depreciation) in the entire economy (not just the public sector, the private sector too)"

I cannot understand how the author claims that 'austerity' is actually intended to increase savings in the economy, other than by government.

Surely if that were so, governments would be actually applying austerity themselves (mostly they are digging their heels in and not cutting back on their lavish spending programs). And they would not have manipulated interest rates down to virtually zero, thereby encouraging savers to spend their money instead of saving it, would not have introduced expropriation of savings (as in the Cyprus template), and would not be indirectly helping home buyers by reducing the mortgage repayments on loans at the expense of savers.

Is it not far more likely that the political elites and central bankers are all nutters and simply don't have a clue what they're doing (except to save themselves and their criminal bankster friends) and what we see today in stagnant economies and rising sovereign debt levels are the result of this unprecedented madness?

If you view them as psychopaths, then it makes far more sense. As long as their needs are fulfilled, then it doesn't matter to them if you die...presuming they even give a hoot and a holler about you to begin with.

Many years ago when I worked for one of the world's largest and most successful American multinational corporations, I was on a management training course and remember someone saying that "to be very successful in politics or in big business, you have to be at least a little bit psychopathic and a little bit paranoid".

As the years went by, I realised he was absolutely right. Today, virtually every member of the political elite has a serious problem with psychopathy.

Jesus, any fool knows you can't spend more than you take in. I tried it and it doesn't work.

Why the hell should government spend money on foreign aid, excessive military, CIA, Drug Wars, politican wars, golden parachutes for cronies and so on when we aren't bringing enough coin to cover current expenses?

Those are all red heerings. You can cut everything you mentioned and we would still have this problem. Little or none of the items you mentioned are done by Japan, Greece, Italy, Portugal, Spain, etc. WHy are they having problems?

Austerity is meant as a way to increase savings? Are you for real? Austerity frees up money that had been promised to retirees so it can be given to bankers who can't afford to take a loss on their bets. We need he Iceland method of dealing with odious debt, not austerity.

The 'too big to fail banks' are desperate. They know that they blew up the world financial system with their one quadrillion unregulated otc derivatives, and fear counter party risk, whereby they kill each other.

They are desperate for a fancy way to persuade the BIS and the people to excuse them, pay for them.

Do you have any idea of monetary policy? Looks like you run some money. When you look at a sovereign, I am sure you look at its GDP or more specifically its aggregate demand. Employees are the engine that drive aggregate demand. If they don't have a job, they don't spend. Moreover, if the restaurant that they used to eat at no longer has demand because they don't frequent it, the restaurant owner has to lay off her workers. This cascades across all businesses.

So when someone says that austerity is a good thing, one wonders where they learnt how to drive an economy.

A person willing and able to work but can't find a job is productivity that is lost forever. It can never be recovered. So why waste that productivity through austerity. It was not the workers who caused the problem in the first place. The problem originates because private debt ended up on the sovereigns balance sheet because the sovereign cannot let a big bank fail.

Let me tell you the secret to eliminating sovereign debt.

Are you ready?

All you have to do is get into the Central Bank building and log onto the computer.

Then

DEBIT THE SECURITY ACCOUNTS and CREDIT THE RESERVE ACCOUNTS.

Debt is gone. It is reallly that simple.

Granted it is a little more complicated in the Euro zone because the currency is fixed (no country has its own currency).

Something for nothing and checks for free. You are no different than the whore political class corrupted by international financiers.Why? Because whiping the debt merely creates more moral hazard. Spend, spend, spend. No understanding of saving for community's best interest.

It is unlikely that either more austerity (belt tightening) or more stimuli can fix the current economic difficulties.We are so far in debt in both sovereign and personal terms neither of these two models can assist. The austerity model (UK) is not doing so well and neither is the stimulus model (France).The outcome is likely a major reset of the financial system which will cause much more trauma than the 2008 upset.Savers beware and stand by for future shock.http://tinyurl.com/c4chw5l

On the narrow issue of 'austerity', in the US, UK and EU, tens of billions could be saved by government cutting spending on programs which have zero effect on the people that governments claim to have been elected to support. We often forget - or are not privy to - huge sums of money are spent by governments essentially on programs which benefit only themselves or serve no useful purpose to the citizens of the country. THAT IS the first place to begin cutting.

But in all seriousness, the author does have a point, even if he argues it from a different (i.e. elitist) perspective than my own. Western societies have lived far beyond their means for years or decades now, and WILL have to cut back on all this unsustainable spending (and unpayable promises) going forward, in one manner or another.

Sucking it all from the middle and lower classes, for the benefit of the upper class, is hardly a justifiable or equitable way of going about it, though.

it is instructive' Tyler attempts to teach, this is one of those warning us of their next moves. Austerity for me but not for theee' meaning MIC, elites, gov workforces. They must rape the middle class it is where the money is... Gird your loins for the Biden inter iew where he says the transitionto the NWO will require all of us to pitch in...

I was thinking the same thing austerity to increase savings! What a fucking joke after Cyprus and the FDIC paper about depositor confiscation. I guess they want us to save it for later banker and government use give me a break.

Nothing is safe except what you physically own and can safely hide anymore.

It's austerity if commercial banks lose on their bets and expect everyone else to pay. Got it. OK. They Party on until the money runs out. They are happy with loaning money on the things you mention, but now their debt junkie is dying.

Anyone who has spent time doing workouts knows that the key ingredient of the creative destruction/Phoenix phenomena is the notion that all stakeholders will share the pain of failure ratably and either get wiped out or wind up with a scaled back or subordinated position in the adjusted capital structure of the transformed debtor.

This is to be distinguished from the "austerity rubric" which permits corrupt stakeholders of influence to scramble and save or bailout their wealth before the proles are forced to fall on the sword of economic failure. This corrupt race to jump to the head of the line reeks of moral hazard and is the essence capital malformation.

Austerity, is another finely crafted peace of Goebbel-Di-Gook.

You can't have your pudding unless you eat your meat. How can you have your pudding if you haven't eaten your meat.

Austerity is absolutely needed but not for the reasons the elite and banksters and lackey polititians want to foist it on us, which is just to enrich themselves with their insane derivative bets and fiat scams. Austerity is needed because we are taxing our environment in an unsustainable manner with unsustainable and unecessary and contrived practices.

The author (and the rest of you) may have forgotten about the elephant in the room (i.e, CDS & Derivative debt to the tune of about 1.5 quadrillion Benny Bux). Right now the elite are getting their ducks in a row and saving the system isn't part of the plan, but positioning themselves as favorably as possible for the day when the reset button is finally hit - and that my friends is what's going to happen. No "fix" is forthcoming, we can't "grow" our way out of the massive debt the gambling wall street crowd have amassed through greed, nor can we "austerity our way back out of it"... too much, too late. When the reset button is hit we will all get hammered and a new world-wide monetary system will be implemented and the concentration of power will be confined to even fewer people than it is. Of course this was planned, we are being bankrupt on purpose in order to facilitate this grand plan. Those of you who believe is it some sort of accidental error by our leadership are naive, very naive.

I propose to talk to you to-night of the Crime of Poverty. I cannot, in a short time, hope to convince you of much; but the thing of things I should like to show you is that poverty is a crime. I do not mean that it is a crime to be poor. Murder is a crime; but it is not a crime to be murdered; and a man who is in poverty, I look upon, not as a criminal in himself, so much as the victim of a crime for which others, as well perhaps as himself, are responsible. That poverty is a curse, the bitterest of curses, we all know.
Carlyle was right when he said that the hell of which Englishmen are most afraid is the hell of poverty; and this is true, not of Englishmen alone, but of people all over the civilised world, no matter what their nationality. It is to escape this hell that we strive and strain and struggle; and work on oftentimes in blind habit long after the necessity for work is gone.
The curse born of poverty is not confined to the poor alone; it runs through all classes, even to the very rich. They, too, suffer; they must suffer; for there cannot be suffering in a community from which any class can totally escape. The vice, the crime, the ignorance, the meanness born of poverty, poison, so to speak, the very air which rich and poor alike must breathe.
Poverty is the mother of ignorance, the breeder of crime. I walked down one of your streets this morning, and I saw three men going along with their hands chained together. I knew for certain that those men were not rich men; and, although I do not know the offence for which they were carried in chains through your streets, this I think I can safely say, that, if you trace it up you will find it in some way to spring from poverty. Nine tenths of human misery, I think you will find, if you look, to be due to poverty.
If a man chooses to be poor, he commits no crime in being poor, provided his poverty hurts no one but himself. If a man has others dependent upon him; if there are a wife and children whom it is his duty to support, then, if he voluntarily chooses poverty, it is a crime—aye, and I think that, in most cases, the men who have no one to support but themselves are men that are shirking their duty.
A woman comes into the world for every man; and for every man who lives a single life, caring only for himself, there is some woman who is deprived of her natural supporter. But while a man who chooses to be poor cannot be charged with crime, it is certainly a crime to force poverty on others. And it seems to me clear that the great majority of those who suffer from poverty are poor not from their own particular faults, but because of conditions imposed by society at large.
Therefore I hold that poverty is a crime—not an individual crime, but a social crime, a crime for which we all, poor as well as rich, are responsible.
http://www.historyisaweapon.com/defcon1/georgecripov.html
The Crime of Poverty

by Henry GeorgeApril 1, 1885

Henry George was an itinerant typeseetter and newspaper editor who became a skilled lecturer and critic of the economic system. His book Progress and Poverty made him famous, and he ran, unsuccessfully, for mayor of New York several times in the 1880s and 1890s. In this address, delivered in an opera house in Burlington, Iowa, George examines the social roots of poverty in the United States in the nineteenth century, challenging the myth of individual blame.

"Austerity is sold as a way to reduce public deficits, but what it is really supposed to do is raise net national savings (savings minus depreciation) in the entire economy (not just the public sector, the private sector too)."

The way net national savings are raised is for the bosses to steal the private sector savings by taxing them, confiscating them by way of bail-ins, swapping them for worthless stocks, etc!

Moreover, GDP is meaningless in terms of repaying debt (or "servicing" debt, as the author seems to think is relevant). Savings - net production over consumption - is the stock from which sound credit can be generated and repaid. Debt originated in any other way is simply deferred default and devalues the currency.

Well, it is nice to have savings but as if there is anything left to save with austerity. Go and tell that to people in Greece and Spain. And even when there are savings, what do they do? They just sit there, do nothing and don't go into the economy because there is no consumer confidence. Interest rates are low so little return. Savings are good for banks to speculate with or as a template for wealth confiscations by banks.

Create a new gold-backed currency, let people trade in their FRN's for the new money, let the market engage in price discovery for the new money, pay off the debt which is in FRNs with these freshly dumped FRNs, effectively sending them back to the wretched womb from which they were born, end The Fed, close the TBTF banks, schedule a parade down Wall St, have Bernanke, Dimon, et al on a float and let us throw rocks wrapped in FRNs at them.

So you did get elected Meat Hammer ! Jamie Dimon might not like your ideas so he may fire you. Still noone is going to implement your ideas and you won't gain political power so why not have a banana split instead while the Masters of the Universe tell YOU what you are going to pay for

When I see someone write "The only way to raise net savings is to cut consumption". I know they are either deliberately lying or stupid. How abour raising incomes? This worked in the 1930s, austerity did not.